The promise and problems of free market environmentalism

In the summer issue of PERC ReportsCharles Kolstad, author of Environmental Economics, suggests that “free market environmentalism works well for problems pertaining to natural resource allocation, where well-defined property rights solve the problem of excludability,” but that it is “less efficient at dealing with environmental goods, such as the provision of clean air, which is nonrival.”

As Kolstad points out, proponents of free market environmentalism often offer a solution to air pollution that includes a technological innovation such as seeding emission streams with tracers to determine specific sources of ambient pollution. Another solution is to rely on common law—”if party A is causing injury to party B through pollution discharge, then party A may seek remedy in court.”

Kolstad believes these ideas for managing air pollution are unsatisfactory. What are your thoughts?